Foreign Exchange Operations of Trust Bank Limited

Foreign Exchange Operations:

 Foreign Exchange- its meaning and definition:

Foreign exchange refers to the process or mechanism by which the currency of one country is converted into the currency of another country. Foreign exchange is the means and methods by which rights to wealth in a country’s currency are converted into rights to wealth in another country’s currency. In banks when we talk of foreign exchange, we refer to the general mechanism by which a bank converts currency of one country into that of another. Foreign trade gives rise to foreign exchange. Modern banks facilitate trade and commerce by rendering valuable services to the business community. Apart from providing appropriate mechanism for making payments arising out of trade transactions, the banks gear the machinery of commerce, specially in case of international commerce, by acting as a useful link between the buyer and the seller, who are often too far away from and too unfamiliar with each other. According to foreign exchange regulation act 1947, “Any thing that conveys the right to wealth in another country is foreign exchange”. Foreign exchange department plays significant roles through providing different services for the customers. Opening or issuing letters of credit is one or the important services provided by the banks.

Activities Related to foreign exchange:

There are three kind of foreign exchange transaction:

a)      Import

b)      Export

c)      Foreign Remittance

Regulations for foreign exchange

Local regulations: Our foreign exchange transactions are being controlled by the following local regulations:

Foreign Exchange Regulation Act: Foreign Exchange Regulation (FERA) Act. 1947 enacted on 11^th March 1947 in the then British India, provides the legal basis for regulation the foreign exchange. This act was adapted in Pakistan and lastly in Bangladesh.

Guidelines for Foreign Exchange Transaction :This publication issued by Bangladesh Bank in the year 1996 in two volumes. This is a compilation of the instructions to be followed by the Authorized Dealers in transactions relating to foreign exchange.

F.E. Circular :Bangladesh Bank issues F.E. circular from time to time to control the export import business and remittance that is to control the foreign exchange.

Export-Import Policy :Ministry of commerce issues Export Policy and Import Policy giving basic formalities for Import and Export Business.

Public Notice :Some times CCI &E issues public notice for any kind of change in Foreign Exchange Transaction.

Instructions from different ministry: Different ministries of the Govt. sometimes instruct the authorized dealer directly or through Bangladesh Bank to follow something required for the government.

International Regulations: There are also some international organizations influencing our Foreign Exchange transactions. Few of them are discussed bellow:

ICC: International Chamber of Commerce is a world wide Non-Governmental Organization of thousands of companies. It was founded in 1919. ICC National committees throughout the world present ICC views to their Governments and alert Paris Headquarters about national business concerns. ICC has issued some publications like UCPDC, URC and URR etc., which are being followed by all the member countries. There is also an international Court of Arbitration to solve the international business disputes.

W.T.O.: World Trade Organization is another International Trade Organization established on 1^st January 1995. GATT (General Agreement on Tariff & Trade) was established on 1^st January 1948. After completion of it’s 8^th round, the organization has been abolished and replaced by WTO. This organization has vital role in international trade through its 124 member countries.

 Letter of credit

A letter of credit is a letter issued by a bank (know as the opening or the issuing bank) at the instance of its customer (known as the opener) addressed to a person (beneficiary) undertaking that the bills drawn by the beneficiary will be duly honored by it (opening bank) provided certain conditions mentioned in the letter gave been complied with.

Flowchart of Letter of Credit Operation

Classification of Letter of Credit:

 In different considerations there are many kinds of L/Cs. Some of them are discussed bellow:

Irrevocable L/C: Irrevocable L/C cannot be amended or cancelled without the consent of the beneficiary or any other interested parties. Banks commonly open this type of L/c.

Revocable L/C: This kind of L/C can be amended or cancelled by the Issuing Bank, without the consent of the beneficiary or any other interested parties. If it is not indicated in the L/C, whether it is Revocable or Irrevocable, then the L/C to be treated as Irrevocable.

Add-confirmed L/C: When a third bank provide guarantee to the beneficiary to make payment, if Issuing Bank fail to make payment, the L/C is called Add-Confirmed L/C. In case of a confirmed L/C a third bank adds their confirmation to the beneficiary, to make payment, in addition to that of Issuing Bank. Confirmed L/C gives the beneficiary a double assurance of payment.

Clean Clause: It is a normal clause L/C without third bank’s confirmation.

Revolving L/C: It is an L/C where the original amount restores after it has been utilized. How many times and how long, the amount will restore must be specified in the L/C. For example, an L/C opened for USD 1000 and shipment effected for USD 500, now the L/C restored for full value i.e. there is scope to effect further shipment of USD 1000 revolving L/C may be opened to avoid difficulties of opening new L/C. This L/C is not allowed in our present import policy.

Transferable L/c: If the word “Transferable” incorporated in an L/C, then the L/C is transferable. The 1st beneficiary can transfer transferable L/C to the 2^nd beneficiary. But 2^nd beneficiary cannot transfer it further to another beneficiary. Transfer may be done to more than one beneficiary, partially, if not prohibited in the L/C.

Restricted L/C: If advising and/or negotiation of an L/C are restricted to a particular bank, the L/C is called a restricted L/C.

Red Clause L/C: A red clause L/C is an L/C, where a special clause is incorporated into it that authorizes the confirming or any other nominated bank to make advances to the beneficiary, before presentation of the documents. In other words this is an L/C, where the Issuing Bank authorizes the negotiating bank to provide pre-shipment finance to the beneficiary. The L/C is called red-clause because, the special clause was originally written in red-ink to draw attention to the unique nature of this documentary credit. Red clause L/C is not allowed in our present import policy.

Green Clause L/C: It is an L/C, where the Issuing Bank authorizes the Negotiating Bank to grant storage facilities to the beneficiary. The special clause was originally written in Green-ink, so the L/C is called Green Clause. In both the case of Red Clause and Green Clause L/C, if the exporter fails to ship the goods the financing bank has the right to demand repayment from the Issuing Bank and that bank would have a similar right of recourse against the applicant.

Clean Letter of Credit: This is a commercial letter of Credit, wherein the Issuing Bank does not ask any documents as evidence of execution of the deal under the L/C. Under the said L/C only bill of exchange may be negotiated or may be paid without any supporting documents. Clean Letter of //Credit is not permissible in our import policy.

Documentary Letter of Credit: All the commercial letter of credits, where export related documents such as invoice, B/L etc. are required to present with the bill of exchange, is called Documentary Credit. Under this L/C, bill of exchange will not be honored without other required documents.

Straight Documentary Credit: Under the irrevocable straight documentary credit, the obligation of the Issuing Bank is extended only to the beneficiary, in honoring draft(s)/ documents and usually expires at the counter of the Issuing bank. This L/C. does not authorize any body to negotiate, purchase the documents. This L/C. is available for payment only at the Issuing Bank’s counter, not available for negotiation.

Irrevocable Negotiation Documentary Credit: This L/C. is available for negotiation by a nominated bank/any bank and expiring for presentation of document at the offices of Negotiating bank. The Issuing Bank is bound to reimburse the Negotiating Bank, if it negotiates the documents complying with the credit terms.

With Recourse and Without Recourse to Drawers: These terms are related with bill of exchange. If the L/C allows a bill of exchange with recourse to the drawer, that means the Negotiating Bank has the right to claim the amount back, from the drawer, if the B/E is dishonored by the drawee. And in case of without recourse, the Negotiating Bank has no right to claim the amount back. From the drawer, if the B/E is dishonored by the drawee. So in case of without recourse the negotiating Bank would be care-full to negotiate the document.

L/C can be classified according to source of fund:

Back-to-Back L/C: Back to Back import L/C is backed by another export L/C. where import of the goods to be made to execute the export L/C and payment of Back to Back bills to be made normally from related export process, the import L/C is called Back to Back L/C.

A Back-to-Back L/C is opened against an irrevocable L/C. The L/C is lien marked with the back-to-back L/C issuing branch. Back to Back L/C may be opened up to 75% of export L/C, (FOB value) and up to 80% where export price is more than USD 60/- per dozen in case of garments industries.

Cash L/C: Where payment of import bills under L/C is being made from (i) Foreign Currency reserve in Bangladesh Bank or (ii) F.C. account with authorized Dealer, the L/C is called Cash L/C.

Barter L/C: Where final settlements are being made through commodity exchange between the nations, the L/C is called Barter L/C.

Different parties involved Foreign exchange transaction:

 Normally the following parties are involved to a documentary credit:

Importer:

The buyer or the importer is he who initiates the credit. He applies to bank for issue foreign a documentary credit. The obligations between the importer and the issuing bank are governed by the application-cum-agreement submitted by the importer to the bank. He is bound to reimburse the bank, which effects payment or incurred a deferred payment undertaking or has accepted or negotiated under the credit as per terms, and to take up the documents.

Opening Bank:

The issuing or opening bank is the importer’s bank and it issues a letter of credit normally pursuant to the terms of sales contract as set out in the application for the credit by the importer. The issuing bank should nominate the bank, which is authorized to pay or to accept drafts or to negotiate, unless the credit allows negotiation by any bank.

Exporter:

The seller or exporter is the beneficiary of the credit. The letter of credit is opened in his favor and addressed to him. The beneficiary has the obligation to make export as per the contract and produce the documents as required by the credit.

The Advising Bank:

It is the bank in the exporter’s country (normally the exporter’s bank), which is usually the foreign correspondent of importer’s bank through which the L/C is advised to the supplier. If the intermediary bank simply advises/notifies the L/C to the exporter part, it is called “Advising Bank”.

The Confirming Bank:         

 If the advising bank also adds its own undertaking to honor the credit while advising the same to the beneficiary, he becomes the confirming bank. In addition, becomes liable to pay for documents in conformity with the L/C’s terms and conditions. The liability of the confirming bank is the primary liability and it is not contingent on the fulfillment of the obligation by the issuing bank.

  The Accepting Bank:

Accepting bank is the bank nominated in the letter of credit to accept bills drawn under the credit. If the bank so nominated accepts the nomination, its responsibility to the beneficiary is not only to accept the drafts drawn but also to make payment on their due dates.

 The Paying Bank:

 Paying bank is a bank in the beneficiary’s country nominated in the letter of credit to make payment against documents to be tendered under the credit. Paying Bank must examine all documents with reasonable care to ascertain that these are drawn in accordance with the terms and conditions of the credit.

Reimbursing Bank:

The issuing bank may indicate in the credit the name of a bank. From whom the paying/negotiating bank can obtain reimbursement. The documents are sent to the issuing bank. The negotiating/paying bank simultaneously makes a claim with the reimbursing bank for the payment effected. Normally the reimbursing bank would be the bank with which the issuing bank maintains an account.

The Transferring Bank:

If the L/C is transferable, then the 1^st beneficiary of the L/C may transfer the L/C to the 2^nd beneficiary, through a bank nominated by the Issuing Bank. This bank is called the Transferring Bank.

Document required for Foreign Exchange Transactions:

Export-Import transactions ask for the following documents:

  Transport Documents

  Insurance Documents

  Commercial Invoice

  Other Documents

Transport Documents:

Transport documents comprises of Bill of Lading, Airway Bills, Truck Receipts, Railway Receipts and Inland Waterway Receipts.

Checking points of this document are:

• The Bill of Lading is issued/endorsed to the order of Negotiating Bank.
• Bill of Lading is clean, showing “Shipped on Board” notation, marked ‘Freight
• Prepaid” [For CFR Basis] and ‘Freight Collect” [For FOB Basis], not short form, Blank back or pre dated.
• The Bill of Lading appears the merchandise covers in Commercial Invoice.
• The port of Shipment, Destination, Shipment Date, Name of consignee,
• Shipping Mark [if any] appears on the Bill of Lading are as per LC term.
• Bill of Lading is signed by the carrier company or his agent.

Commercial Invoice:

Checking points of this document are:

• The invoice dated and signed by the beneficiary.
• The invoice is issued to the party concerned as stated in the LC.
• Description of goods is as stated in the LC.
• Unit price mentioned as stated in the LC.
• Proper Trade-Term is mentioned.

Insurance Documents:

Checking points of this document are (in case of CIF basis):

• The Insurance Policy is valid.
• The policy is issued in the name of LC Issuing bank a/c: importer.
• The policy is signed by the authorized official of the Insurance Company.
• The policy is in negotiable form, duly stamped and dated prior the BL date.
• Description of goods, name of carrying vessel shown in Insurance Policy are same as shown in BL.
• The policy covers Transshipment [if allowed in LC] clause.
• Policy covers 10% above the value of consignment.
• Policy indicates where and in which currency the claim [if any] will be settled.

Other Documents:

As per UCP 500, other documents comprises of all other documents other than Transport Documents, Insurance Documents and Commercial Invoice.

Certificate of Origin: Checking points of this document are:

• The Certificate is issued by the concerned authority of exporting country as stated in the LC [usually such Certificates are issued by the Chamber of Commerce & Industry of exporting country].

Beneficiary’s Certificate: Checking points of this document are:

• The certificate issued by the beneficiary stating the particulars as stated in the LC.

Packing List: Checking points of this document are:

• The Certificate is issued and prepared by the beneficiary as per instruction given in the LC.

Inspection Certificate: Checking points of this document are:

• The Certificate is issued by the competent authority as approved for that country.
• The Inspection Certificate can also be issued by the beneficiary/manufacturer if allowed in the LC.
• The Certificate is signed-sealed certificate the contents as required and issued prior to shipment of the goods.

Bill of exchange: Checking points of this document are:

• The bill of exchange is drawn by the beneficiary as mentioned in the LC duly signed and dated.
• The amount is identical with the amount of Commercial Invoice.
• The amount mentioned in figure and words are consistent.
• The bill of exchange is in order and/or endorsed properly.

Import:

Import trade in Bangladesh is controlled under the Import and Export control Act 1950. Authorized Dealer Banks will import the goods into Bangladesh following the import policy, public notice, F.E. circular and other instructions from competent authorities from time to time. The whole import functions of the branch as far I have understood are discussed bellow:

Procedure of import

Import of merchandise essentially involves two things:

1. Bringing of goods physically into the country
2. Remittance of foreign exchange towards the cost of the merchandise

The Ministry of Commerce through the Chief Controller of Import regulates physical import and Exports being office at the important trade center while Bangladesh Bank regulates the payment for the imports through its various departments. The following are the steps involved in import of merchandise into Bangladesh.

Registration of importer: In terms of the Importers, Exporters and Indentors (Registration) Order 1981, no person can import goods into Bangladesh unless he is registered with the Chief Controller of Import and Export or exempted from the provisions of the said order. So the following documents are required to be submitted to the licensing authority for registration as importers:

1.                                 i.            Questionnaire form duly filled in and signed
2.                               ii.            Income tax registration certificate
3.                             iii.            Trade License from the Municipal or Local Authority
4.                             iv.            Bank certificate
5.                               v.            Nationality certificate
6.                             vi.            Partnership Deed where applicable
7.                           vii.            Certificate of Registration with the Registrar of Joint Stock Companies and Memorandum and Articles of Association in case of Private and Public Ltd. Co.
8.                         viii.            Certificate from the Chamber of Commerce/Registered Trade Association
9.                             ix.            Ownership documents or rent receipts of the place of business
10.                               x.            Any other documents required under the relevant import policy.

After submission of the above documents and payment of requisite fees, if the documents are found in order and the C.C.I & E is satisfied, the Import Registration Certificate (IRC) is issued to the applicant-importer.

Import Policy:

The Chief Controller of Imports and Exports announces the Import Policy concerning various aspects of imports. The main points covered by the import policy are the following:

1. Items eligible for imports during the shipping period.
2. Procedure for formation of groups.
3. The dates for opening of L/C and shipment.
4. The rules for re-validation of the Licence/LCA and the L/C.

Licensing for Imports:

Most imports into Bangladesh require a license from the Licensing Authority. In recent years, the task of licensing has been delegated to the commercial banks. It is done by LCA (Letter of Credit Authorization Form). Blank LCA forms can be obtained by the importer from their banker. The following documents are required to be submitted by the import to his banker.

1. LCA Form property filled-in and signed.
2. LC Application.
3. Purchase Contract in the shape of an Indent or Proforma Invoice.
4. Insurance Cover Note.
5. Membership Certificate from a chamber of Commerce and Industry or Registered Trade Association.
6. Import Registration Certificate (IRC).

On receipt of LCA Form and the required documents, the bank should carefully scrutinize the documents.

An Opening of Letter of Credit:

Importer applies to the bank to open L/c in favor of foreign supplier. The bank has its printed application form and the importer should carefully fill in this form. On receiving this application, the bank scrutinizes it to ensure that:

• Whether the customer fulfils all the required conditions/criteria to be eligible as an importer as per provisions of the Import Policy Order and Guidelines for Foreign exchange Transactions in force and the supporting documents/papers required are submitted.
• Whether the items for import of which the documentary credit need to be opened is permissible i.e. not included in the negative/restrictive list as per Import Policy order in force.
• Whether there is any legal/technical defects/restrictions in opening the Letter of Credit under the various sources as intended by the customer.
• Whether we are holding satisfactory credit report on the beneficiary to satisfy the relevant provisions of the guidelines for Foreign Exchange transactions.
• Whether credit facility has already been approved by the Executive Committee of the Board of Directors.
• On receipt of the L/C application over the counter or through dispatch/mail section, the receiving date and time to be recorded on the L/C application.
• Signature of the customer on the L/C application to be verified by authorized/ designated officer.

• L/C application with all supporting papers to be checked to ensure that the required papers are as per requirement of Guidelines for Foreign Exchange Transactions and are consistent to each other.

L/C application must show the following clearly:

–           Full name & address of the beneficiary.

–           The amount of the credit.

–           The Credit whether to be irrevocable or confirmed irrevocable.

–           Whether the credit is available by payment, acceptance or negotiation.

–           On which party the drafts are to be drawn and the tenure of such drafts.

–           A brief description of the goods, including details of quantity and unit price.

–           Whether freight is to be prepaid or not.

–           The port of shipment and the destination.

–           Whether the transfer of the goods from one vessel to another, or from one mode of transport to another, route, is prohibited.

–           The last date for shipment.

–           The date and place of expiry of the credit.

            –           Negotiation period.

–           Details of the documents required and how those are to be dispatched to the issuing bank i.e. by ordinary mail/courier.

            –           Whether the credit is to be a transferable one.

            –           How the credit is to be advised i.e. by mail/telex.

• Letter of Credit authorization form duly filled in and signed.

• Indent or Proforma Invoice issued by Seller or his agent (Indenter) duly counter signed by the customer.
• Insurance certificate or policy (Marine/Air/Mail/Truck) covering the goods at 10% above L/C value for the whole journey/shipment together with unconditional premium paid receipt.

• Prior permission/registered LCA form, No objection/any other certificates from the concerned authority as required as per provision of the Import Policy Order.
• I.M.P. form duly filled in and signed.
• In case the L/C application is not complete or in consistence or the required papers are not submitted, the customer should be promptly contacted for rectification of the defects.
• When the L/C application is found to be in order and the client has sufficient approved credit line for opening L/C a L/C number is to be allotted by journalizing/the particulars of the entry i.e. L/C and expiry date, advising/confirming bank etc. in the L/C register/data base.
• In case the client does not have approved credit line for opening L/C the Manager of the Branch shall take necessary arrangement to submit proposal to the Credit committee/Executive Committee of the Board and keep pending of opening the L/C till its approval. On receipt of approval the Manager shall issue a sanction letter to the client providing copies of the same to Credit Division.
• If Foreign Exchange is intended to be bought from Bangladesh Bank against LCAF, it has to be registered with Bangladesh Bank’s Registration Unit located in the concerned area office of the CCI&E.
• To avoid loss due to fluctuation of exchange rates, hold a declaration of the client that exchange fluctuations would be on account of the importer.
• To set-up a file for the L/C.
• To prepare the Letter of Credit either in mail or telex format with all material particulars including the other terms and conditions in accordance with the customer’s instruction together with the related reimbursement instruction in standard format (Mail/Telex as the case may be) for sight L/C unless condition is given in the L/C that remittance will be effected by the bank directly on receipt of shipping documents.
• To prepare the vouchers to record the contingent liability for the L/C opened and realize margin, commission, telex charges, postages etc. as per bank’s schedule of charges/sanction letter.
• To furnish all the L/C related papers including copy of the prepared letter of credit and copy of vouchers in the L/C file.

Before Dispatching/ Transmitting the L/C:

• Check whether the opening of the Letter of Credit is approved by the competent authority.
• Review all documents including the Letter of Credit and vouchers.
• If found in order, sign the letter of credit including the accounting vouchers.
• The original L/C must be signed jointly by two authorized signatories.

Amendment to L/C :

Not frequently the letter of credit opened by a Bank, needs amendment either because the term and condition incorporated in the L/c conflict with those of the underlying contract between the buyer and the seller or the buyer and seller agree, at a later date. The bank would need a written request from the importer who generally makes the request after obtaining consent of the supplier. Such amendments will of course be effective if all the parties to the L/c, namely the L/C Opening Bank, the advising bank and the beneficiary agree to it.

Scrutiny and Lodgment of Documents:

 Once beneficiary sets about the task of collecting and preparing the documents   stipulated in the L/C. He collects Bill of Lading from the carrier company, prepares the invoice, obtain certificate of origin, packing list, bill of exchange and so on and presents these to his banker. After that, the negotiating bank forwards the supping documents to the opening bank.

Verification and Lodgment of Documents by the L/C Opening Bank :

On receipt of the shipping documents from the negotiati8ng bank, the L/c Opening Bank should carefully examine these to ensure that they confirm to the term of the credit:

1. The documents have been negotiated within the stipulated date.
2. The amount drawn does not exceed the amount authorised in to credit.
3. The merchandise is properly invoiced.
4. The bill of Lading is clean, shipped on board, showing freight prepared and endorsed to the order of the issuing bank shows the port of shipment, the port of destination, the name of the consignee and the date of shipment are in keeping with the term of the credit.
5. Is properly signed by the shipping company.
6. The Certificate of Origin.
7. Other documents like weight list, packing list, pre-shipment Inspection Certificate etc.

If thereby any discrepancy in the documents, the bank should immediately advise the importer to seek his acceptance of the document. If the importer refuses to accept the documents the bank should advise the negotiating bank by telex or SWIFT within 7 working days for instruction with regard to disposal of the goods and the documents.

On being satisfied that the documents are in order or in the event of discrepancies, these are acceptable to the importer, the bank lodge the bill in PAD. After passing necessary accounting entries in the book of accounts, necessary endorsement is made in the L/CA indicating the amount of the remittances.

After the lodgment, the bank asks the importer to retire the bill. After retirement the amount of remittance towards cost of the merchandise is reported to Bangladesh Bank on Form “IMP”.

Shipping Guarantee:

Shipping guarantee is a Letter of Guarantee/Indemnity issued jointly by importer (consignee) together with a bank (L/C opening Bank) in favor of a commercial carrier or their agent whereby they are authorized to release imported merchandise (title being in favor of the co-issuer Bank) to a consignee in the absence of original shipping bill i.e. bill of Lading/airway bill while the co-issuer furnish an assurance/undertaking to submit the original Bill of Lading/airway Bill to the carrier as soon as the same is in their possession. However against the issuance of a letter of indemnity, the bank should obtain a counter indemnity signed by the importer in favor of the issuing bank whereby they assume full responsibility for any obligation the bank assume in issuing the shipping guarantee and also undertake acceptance/payment of documents/draft under the related Letter of Credit irrespective of whether those are discrepant or not.

Before Issuing the Shipping Guarantee:

1.        I.            Head Office approval is essential in cash where the customer has not adjusted    the related import liabilities or do not have approved LIM/LTR facility limit.

2. The Branch shall obtain counter indemnity from the customer in favor of the Bank.

3. The customer shall submit an unconditional undertaking to accept the related shipping documents even with any discrepancies.

1.  IV.            The Shipping Guarantee/Letter of indemnity must be signed jointly by two authorized signatories.

Procedure :

On receipt of application from a customer to issue a shipping guarantee the following procedure will be followed:

i.          Signature of the customer on the counter Indemnity/undertaking to be verified by the authorized officer.

ii.         Verity the contents of the Customer’s Indemnity as regard L/C No., name of drawee, merchandise description, amount, Bill of Lading/Airway Bill No. shipping mark etc. with the copies of Invoice and bill of lading against the terms of the L/C to ascertain that those are identical and in line with L/C terms.

iii.        Check whether the Letter of guarantee is properly stamped.

iv.        If found alright journalize/capture the particulars of the letter of indemnity in the shipping guarantee register/data-base after alloying an indemnity number serially in numerical order.

1. Verify signature of the customer on the letter of Indemnity submitted for counter signature by the bank officers with their official seal.

Important points to prepare an L/C:

To prepare an L/C the branch takes care on the following points:

L/C number: The branch will put a number for each L/C., which is the serial number of the L/C for a particular year. First L/C of MBL Elephant Road branch in 2006 may be numbered likeMBL/Elephant Road/1742010401.

Place and date of issue: L/C must indicate the place and date of issue.

Date and place of expiry: L/C must have an expiry date. This is the last date of presentation of document under the L/C. Place of expiry of the L/C also to be mentioned in the L/C. Normally it should be the counter of the Negotiating Bank.

Shipment date: There should be a last shipment date after which shipment is not allowed. Bank may also fix-up a first shipment date before which shipment will not be allowed.

Presentation period: Issuing bank will allow a period within which exporter must present the export documents to the negotiating bank or to any other nominated bank. This may be 15 days from the date of shipment. Maximum may be allowed one month, but within the expiry date of the credit.

Applicant: Name of the applicant with business address to be put in the L/C.

Beneficiary: Name of the beneficiary with address also to the indicated in the L/C.

Advising Bank: Name of the advising bank with address to be mentioned in the L/C.

Amount: Every L/C must show the amount of the L/C. The word “About” may be used with amount, which means 10% more or less of the said amount.

Part-shipment and Trans shipment: Issuing bank also clearly indicate in the L/C whether part-shipment and trans shipment are allowed or not.

Availability: L/C must indicate whether the credit is available by payment, by negotiation or by acceptance.

Port of shipment and port of destination: L/C will also indicate from where shipment to be made and where goods to be delivered.

Tenure of the draft: Whether the draft to be drawn at sight or usance, also to be cleared in the L/C.

Documents required: Bank will give the list of required documents and data content therein. Each and every term must be supported by the documents, because any term without asking document is valueless.

 Payment: When, where and by whom payment is to be made, also to be indicated in the L/C.

UCP: Bank will incorporate the reference of UCP 500 in the L/C for its application in all the operation of the L/C.

Bill of lading: B/L must be issued or endorsed to the order of the Issuing Bank. It should be ‘clean’ and “freight prepaid” if L/C is on CFR basis short form and charter party B/L to be avoided. All these terms to be incorporated in the B/L clause of the L/C.

Bill of Exchange: Bill of Exchange to be drawn on the Issuing Bank.

Pre-shipment Inspection: Pre-shipment inspection certificate is compulsory for both government and private import except in few cases.

Data content: Invoice and other documents if required should indicate the H.S. code number. LCAF No with description of the item and country of origin.

Special conditions: Special conditions, such as in case of food, machineries, vehicles and any other items should be incorporated in the L/C where required.

Authenticity of the credit: L/C to be authenticated by putting a test number or signing by two authorized officers.

 L/C advising:

The L/C duly signed by two authorized officers, whose specimen signatures are already recorded with the correspondent banks, must be addressed to the beneficiary. Bank generally does not enter into direct contact with the beneficiary. Instead they utilize the services of its own branch office (if any) or correspondent bank at seller’s country for the purpose of advising it to the seller (beneficiary). Thus the correspondent bank becomes the “Advising Bank”.

The process of advising a credit consists of forwarding the original credit to the beneficiary to whom it is addressed. Before forwarding/advising the credit to the seller under appropriate forwarding coverage, the advising bank has to verify the signatures of the officers of the opening bank and ensure that the terms and conditions of the credit are not in violation of regulations relating to export. While advising, the advising bank does not undertake any liability.

Examination and scrutiny of import documents:

After shipment of the goods, the exporter submits the export documents to the negotiating bank. Negotiating bank checks and sends the documents to the issuing bank after negotiation. Upon receipt of the import documents issuing bank will examine the documents carefully. If there is any discrepancy in the documents, bank will decide within 7 banking days, following the day of receipt of the documents, whether it will accept the documents or will refuse. If the issuing bank fail to communicate the refusal to the negotiating bank within 7 days, the documents deems to be accepted.

At time of scrutiny the following points to be checked specially:

1.  Bill of Exchange:

a)      Is the bill drawn in terns of the L/C and does it bear L/C no. and date?

b)      Does the amount of the BOE in words and figures agree and is it in the same currency of the L/C?

c)      Whether the draft is drawn on the issuing bank or not?

1. Invoice:

a)      Does the invoice value agree with the amount of the BOE?

b)      Does the invoice value clearly state the unit price i.e., FOB/C&E/CIF as mentioned in the L/C?

c)      Does the description of goods declared in the invoice agree with that of the L/C?

d)     Does the shipping mark on invoice agree with those on B.L /AWB / TR/ RR?

e)      Does the gross weight and net weight if shown on invoice agree with those on B/L?

f)       Custom invoice and /or consular invoice to be presented as per credit terms.

1. Transport documents:

a)      Has the full set of original transport documents have been submitted?

b)      Is the B/L marked ‘ON BOARD’?

c)      Is the B/L clean?

d)     ‘Combined’ ‘Charter party’, ‘Short form’ B/L is not acceptable if not allowed in the L/C.

e)      Transshipped B/L not to be acceptable unless allowed by L/C

f)       Is ‘Freight prepaid’ or ‘Freight payable’ at destination in accordance with L/C terms?

g)      Are shipping documents properly endorsed?

h)      Are the name(s) and address of the notifying party(s) identical with those in the L/C?

i)        The date of shipment on the transport documents must not later than the date stipulated in the L/C.

j)        B/L must be issued in order of the issuing bank.

k)      The port of shipment and destination must be as per credit terms.

l)        B/L must bear the name of carrying vessel and the flag.

1. Pre-shipment inspection report:

a)      Inspection done by the authorized person called by the L/C

b)      Inspection done at named place

c)      Inspection certificate must confirm the specification called for in the L/C

d)     Certificate must confirm that they have inspected the goods related to the L/C under reference

e)      Inspection certificate must confirm the quality of the goods they inspected as called by the credit.

Beside the above, the bank examines and scrutinizes the following:

a)      Whether all the documents required by the credit are submitted

b)      Documents to be consistent with one another

c)      Documents to be presented within the stipulated time

d)     Documents to be issued by the authorized person as stipulated in the credit

e)      Documents to be examined as per credit terms and international standard banking practice

Lodgment:

 If import documents are found in order, they are to be made entry in the bill register and necessary vouchers to be passed, putting Bill number on the documents. This process is called Lodgment of the bill. The word “Lodgment’ means temporary stay. Since the documents stays at this stage for a temporary period i.e. up to retirement of the documents, the process is called lodgment. Bank must lodge the documents immediately after receipt of the same, not exceeding 7 banking days, following the day of receipt of the documents, (Article 14, UCPDC-500).

Procedures for lodgment:

ð  Bill register: Bank entry the documents in the bill register. Bill register must include date of lodgment, bill no, bill of exchange no, amount, name of the negotiating bank, B/L no and date, merchandise, retirement date and other particulars.

ð  Application of rate: Foreign currency would be converted at Bangladeshi currency selling rate ruling on the date of lodgment.

ð  Exchange control form: IMP & TM form must be filled in and signed by the importer at the time of lodgment.

ð  Endorsement of LCAF: LCA form must be endorsed showing utilization of shipment.

ð  Noting on the file: Utilized amount showing bill number to be noted on the printed format of L/C file.

Accounting procedures:

Dr.   Liability as per contra (BB L/C or Cash L/C)

Cr.   Asset as per contra (BB L/C or Cash L/C)

Dr.   Bill of exchange

Dr.   FCC A/C                                 For sight bills

Cr.   TBL Gen. A/C HO, ID

Dr.   Asset as per contra (BB Bills/DA Bills)

Cr.   Liability as per contra (BB Bills/DA Bills)

Retirement:

When the importer release the import documents from the bank by acceptance/cash payment or under post import bank finance, it is known as retirement of the import document.

Steps for retirement:

  Intimation to the importer: Bank will intimate the importer with full particulars of the shipment to retire the import documents on receipt of the same as per terms of the credit.

  Acceptance:  Usance bill for collection is to be presented to the importer for acceptance. Sight bills need no acceptance if not discrepant. The maturity to be calculated from the date of acceptance or negotiation as per credit terms. A due date diary to be maintained for maturity date.

Accounting procedures: At the time of endorsement of the documents for custom clearance, bank passes the voucher as under:

Dr.   Party’s A/C

Cr.   Income A/C (commission on clearance of imported consignment).

For cash L/C retirement:

Dr.   F.C. deposit (WFH) A/C

Cr.   F.C. deposit (cash L/C cover) A/C

Dr.   F.C. deposit (cash L/C cover) A/C

Cr.   Bill of Exchange/TBL Gen. A/C HO ID

Dr.   Party’s A/C/MPI A/C

Cr.   WES fund purchase A/C

Cr.   FCC A/C

Cr.   Stationary A/C

Cr.   TLX charge/P&T recovery A/C

Cr.   Others

For Back to Back Bills:

Dr.   F.C. deposit A/C (F.C. held against BB Bills)

Cr.   TBL GEN. A/C HO ID

Dr.   Party’s current account/marginal deposit account

Cr.   FCC A/C

Cr.   Commission A/C (Acceptance)

Cr.   TLX charge/ P&T recovery A/C

Cr.   Stationary A/C

Cr.   Others

Dr.   Liability as per contra (BB Bills)

Cr.   Asset as per contra (BB Bills)

Payment of import bills: In case of back-to-back usance bills payment to be made on or before maturity date of the bill out of the realized export proceeds. In case of cash sight import bills bank makes payment from its F.C deposit account and will realize the value of foreign currency from the client account.

Back-to-Back L/C:

The benefit of a L/C (the Master L/C) may be made available to a third party where the primary beneficiary uses the master L/C as security collateral to obtain another L/C (the secondary credit) in favor of the actual supplier. The secondary credit is known as back-to-back L/C.

A Back-to-Back L/C involves two separate L/Cs.

• One opened in favor of the first or primary beneficiary, and
• One opened for the account of the first beneficiary in favor of a second beneficiary who is supplying the goods.

The first beneficiary of the Master L/C becomes the applicant for the back-to back L/C. Back-to-Back L/C is commonly known as Buying L/C, whereas Master Export L/C is known as Selling L/C. What percent of export L/C’s value is permitted to open a back-to-back L/C its depend upon the nature of the goods and getting information from the commerce ministry.

Checklist to open Back-to-Back L/C:

I  Applicant is registered with CCI & E and has bonded warehouse license.

II The master L/C has adequate validity period and has no defective clause.

III L/C value shall not exceed the admissible percentage of net FOB Value of relative Master L/C.

IV Essence period will be up to 180 days.

Papers required opening Back-to-Back L/C:

1. Import Registration Certificate & Export Registration Certificate.
2. L/C application & LCA form.
3. Proforma Invoice / Indent.
4. Insurance Policy.
5. IMP form.

In addition to above following papers are required for Readymade Garments Industry:

1. Bonded Warehouse license.
2. Quota allocation letter from EPB (where applicable)
3. Letter of disclaimer from landlord if rented premises.

Steps of Opening Back-to-Back L/C:

1. Importers’ application to open a BTB L/C against specific    Master L/C.
2. Export dept. marks lien of the export L/C and forwards it to the

                  import dept.

1. L/C opening desk then enters all particulars of the master L/the party registers and maintains account of such master L/C. Any amendment brought in the master L/C is also recorded in the register.
2. Obtain credit report of the beneficiary (where applicable).
3. Examination of L/C application form—whether within the credit Limit, dully signed by the concerned person and also signed by the Applicant.
4. Necessary entries into the B.B. L/C opening register

Post import finance:

When the importer does not come forward to retire the import documents, or requests the bank for finance against the imported consignment, then arises the necessity of post import investment. If the consignment is not cleared within 45 days, from the date of arrival, custom authority may auction the consignment under section 167 (8) and amended section 82 of the Custom Act 1969. Under such a situation bank becomes compelled for forced clearance of the consignments under Murabaha post import investment. If the documents are discrepant, party’s acceptance is required for clearance of the goods.

Bank issues notice to the client, to retire the documents immediately after receipt of the documents and it will scrutinize the documents within 7 working days, from the date of receipt of the documents. If the documents are correct in all respect, the final notice is to be issued to the client before forced clearance of the goods under MPI.

Export:

Export means outflow of goods and services produced in one country, which purchase by Government, Firms and individuals of other countries. Development of a country depends on its participation in the international trade by increasing production and export of commodities and service sector. By way of this a country can improve Employment Generation-Income level-Savings-Growth-Economic Development.

The imports and exports trade in Bangladesh is regulated by the Import & Exports Control Act 1950. There are number of formalities an exporter has to fulfill before and after execution of export, some of are as under:

Benefit of Export:

Development of a country depends on its participation in the international trade by increasing production and export of commodities and service sector. By way of this a country can improve Employment Generation-Income level-Savings-Growth-Economic Development.

Export Receipts Statistics of Bangladesh:

 Raw Jute6182Jute Goods [excluding carpets]242257Tea1715Leather207191Frozen Shrimps and Fish276322Readymade Garments31253258Hoshiery Products14591654Naptha and Furnace Oil1031Fertilizer4879Others541659

TOTAL

59866548

 Source: Statistics Department, Bangladesh Bank & EPB.

Export Target of Bangladesh:

Source: Export Policy [2011-2008].

Weakness and Problem in Export Sector of Bangladesh:

Commodity Areas: Very small numbers of commodities are occupying maximum share of our export. Jute, Jute and Jute goods, frozen fish leather occupied more than 90% of our total exports.

Geographical Areas: Our export market is very small in number i.e. USA and EEC     countries are the purchasers of 80% of our total exports.

RMG Sector:

Shortage of backward linkage industries, inadequate infrastructure, Quality Control and design, withdrawal of Quota and GSP facilities, Buyers market Diversion towards

African nations, Introduction of microelectronics in apparel industries in developed countries.

Furthermore, burden of Tk about 8.80 crore are carrying by the NCBs which is 30% of total loan amount provided by them in RMG sector. The such huge amount of money mostly remained unpaid for a long time because of non realization of export proceeds due to failure in shipment in time, failure in maintaining quality, failure in production in scheduled time. But the banks compelled to make payment of import bills under BBLC from their own fund instead of export proceeds against the respective export LCs.

Jute and Jute Goods Sector:

Failure in promoting export market, lack of publicity regarding the use of Jute and Jute products as  environment friendly goods. Reduction in quality Jute and Jute goods. Price competition in world market etc.

Leather and Leather Goods:

Shortage of forward linkage industry, shortage of skill manpower, shortage of training institute for this sector, etc. For the past few years amount of default loan in this sector increasing alarmingly. An amount of Tk 8.16 Crore has become defaulted about of total loan amount of Tk 1400 Crore in this sector.

Frozen Food:

This sector is suffering since EU ban in 1997 and devastating flood of1998. Traditional production method, lack of modern equipment and skilled man power in this sector and management of international standard.

Tea:

Increase of domestic demand, Decrease in production rate [Bangladesh: 1150 Kgs/Hect. India: 1700 Kgs/Hect. Some other countries: 3000-5000 Kgs/Hect]. Lac of government initiatives, lack of capital investment, obsolete production method, reduction in productivity of tea plants etc.

In the context of increasing competitiveness and openness of the world economy, Bangladesh should exploit the opportunities offered by the world community to expand the export base and explore new markets by diversifying its exportable goods and services and diversified new markets.

Export Policy [2008-2011] of Bangladesh:

Export Policy of Bangladesh has formulated by the Ministry of Commerce to provide the overall guideline and incentives for promotion of export from Bangladesh. This Export Policy will continue till June 2011. However, this Policy will be valid until the next Export Policy is announced.

Objectives of Export Policy [2008-2011]:

–                      Restructuring and capacity building of Export Promotion Bureau, Seaport, and port, Airport, Customs and Vat, BSTI, Tea Board and other export activity related bodies.

–                      To implement strategic plan and maximum utilization of computer technology, E-commerce and other modern technology to expand export markets.

–                      To increase value addition of exportable items by development of Forward and Back ward linkage industry to increase maximum exportable products.

–                      To diversify and improve the quality of exportable items to exploit new opportunities and protect existing market.

–                      To develop the export trade infrastructure and well trained manpower.

–                      To simplify the export procedures and rationalize the incentives structures to exports.

Export Incentives: To achieve the objectives of Export Policy many incentives and facilities have been extended to the exporters. Some of those incentives and facilities are as under:

Convertibility of Taka: Taka has been made convertible in the current account from March 26, 1994 in line with the policy of export-led growth in the world market. Under this system, exporters are getting the following facilities:

Exporters Retention Quota: Merchandise exporters can retain upto 10% of realized FOB value of their exports in Foreign Currency Account for RMG, Naptha, Furnace Oil, Bitumen and other Petroleum Products and other goods having high import contents and up to 50%  of realized FOB value of their exports for non traditional item and service exports such as data entry, software etc.

Fiscal Incentives:

  Duty Draw Back

  Export Credit

  Export Development Fund [EDF]

  Duty-Free Import of Capital Machinery

  Duty-Free Import of Raw Materials

  Bonded Warehouse Facility

  Sale of Rejected Goods

  Income Tax Rebate on Export Earnings

  Cash Incentives

  Export Credit Guarantee Scheme [ECGS]

Other Some Incentives:

Reduced airfreight for export of all items under crush program including fruits and vegetables and Special Premium Rebates are allowed on fire and marine insurance covers to export oriented industries.

Local raw materials used as direct input for export products are regarded as ‘deemed export’ and qualify for all export incentives and benefits.

National Trophies are awarded to outstanding exporters every year and Trophy winners are treated as CIP.

Procedure/Formalities for Export:

The imports and exports trade is regulated by the Import & Exports Control Act 1950.

There are number of formalities an exporter has to fulfill before and after execution of export, some of are as under:

The intending exporter has to register with CCI&E and obtained Export Registration certificate [ERC]. The ERC number is to be used in all places relating to exports.

Securing Export Order:

To secure export order the exporters may contact local chamber commerce of potential buyers, the export promotion bureau, Bangladesh mission abroad and by direct contact with foreign buyer through correspondences.

Receiving Letter of Credit:

After making contact with foreign buyers and reaching on agreed price and terms, conditions the exporters receive Letter of Credit.

Procurement and Shipment of Goods:

After receipt of LC the exporter has to procure or manufacture the contracted goods and ship the same.

Preparation and procurement of Export Documents:

After making shipment the exporter has to prepare documents i.e. Bill of Exchange, Commercial Invoice, Beneficiary’s certificates and procure some documents i.e. Transport Documents, Certificate of Origin, Insurance certificate, Inspection certificate and other documents as required as per LC terms.

Submission of documents to the bank for Negotiation:

After preparation and collection of all documents as per LC terms the exporter has to submit the documents to the bank for Negotiation/Payment/Purchase.

Role of Banks in the Export Sector of Bangladesh:

All the financial requirements of an exporter, from the time he enters into a sale contract and start working on it and till he receives final payment from abroad, are met by commercial banks. In that case banks play an important role in the export sector of Bangladesh and contribute by financing in the export sector by following categories:

Pre-Shipment Credit: Pre-shipment credit is given to the exporters, for the activities prior to shipment of goods for export. Some example of Pre-shipment credit: Cash for local procurement of raw materials and its related expenses, Procuring & Processing of goods for export, Packing and transportation of goods for export, Payment of insurance premium, Inspection fees, Freight charges etc.

Pre-Shipment Credits are in following Forms:

1. Export Cash Credit [Hypothecation]: This for of credit is allowed to exporter against hypothecation of raw materials or finished goods intended for export. Since the bank has got no security against this credit except charge documents and lien on export LC, bank obtain letter of hypothecation creating charge against the goods in favor of the bank only but neither the ownership nor the possession on it.

1. Export Cash Credit [Pledge]: Under this arrangement bank provide finance to the exporter against pledge of goods to be stored in the go down under bank’s control against letter of pledge and other charge documents. In this case the goods remain as security under banks control and possession. In the event of failure of the exporter to honor commitment, the bank can sell the goods for recovery of bank dues.
2. Export Cash Credit against Trust Receipt: This type of credit facility is allowed to exporter when the exporter wants to utilize the credit for processing, packing and rendering the goods in exportable condition and when it seems that the exportable goods can not be taken in the banks custody. In this case exporter has to execute a stamped in favor of bank and a declaration stating that the goods purchased with financial assistance of bank are held by him in trust for the bank. Collateral security is obtained against this credit also.
3. Packing Credit: This type of credit is allowed for a transitional period from dispatch of goods till negotiation of export bills. The purpose of this credit is to pay the transportation cost of goods to be exported. The amount disbursed under export cash credit [hypo/pledge] are to be adjusted from the drawings of packing credit which is, in turn to be adjusted by negotiation of export bills.
4. Back to Back Letter of Credit: Under this arrangement bank finance exporters by way of issuing back to back letter credit on behalf of exporter for procurement of raw materials and accessories favoring the manufacturer/supplier home and abroad against lien of export LC and collateral security.

Post-Shipment Finance: Usually the exporter can not afford to wait for a long time for payment to local manufacturer/supplier and other financial obligations. Resulting which the exporters need post-shipment credit facility. Considering the genuine need, and worthiness of export and other security measures bank allow credit facility to exporters.

Some Form of Post-Shipment Credit Facility:

1. Negotiation of Documents under LC: Negotiation means payment of the value of the drafts drawn under the LC. Under this arrangement, upon receipt of credit conform documents from the exporter, banks pay the value of the drafts to exporter.
2. Purchase of DP & DA Bills :In this case bank purchase/discount the DP and DA bills at rate published by the bank. Before allowing such credit bank should check all the documents presented are strictly as per terms and conditions of the LC and there is clear payment instruction in the LC from the LC issuing bank.

1. Advance against Bills for Collectio: Exporters can submit the export document to a bank after execution of export for collection of the proceeds but the deal was not under any LC, documents drawn under LC but some discrepancies are there. To meet the exporters need bank can make advance to exporter from 50 to 80% of the bill value considering the relationship, past track record, and obtaining collateral security from exporter.

Different Methods of International Trade Payment:

1. Cash in Advance: Under this arrangement, buyer pays the value to exporter against the goods to be shipped and services to be provided in some future date. After receipt of payment exporter ship the goods and provides services to buyers. But the system is disadvantageous for buyer because buyer blocking his fund in advances having no assurance of receipt of goods and service in time as per contract. So such type of payment is considered as risky and expensive for buyers but favorable for seller.

1. Open Account: Under this method, the sellers are in risky situation because he has to deliver the goods and service to buyer before receiving payment. Buyer makes payment only after receipt of goods and services as per contract terms. So before going such transaction sellers should check the past record, worthiness and business history of the buyer and if it is found satisfactory only seller can proceed further.

1. Collection against Payment [D/P]: Under this method, exporter ship the goods and draw bill of exchange on the buyer and submit the documents to a bank with instruction to collect the proceeds through its correspondent bank located in the buyers country. In this case documents delivered only against payment.

1. Collection against Acceptance [D/A]: Under this method, exporter ship the goods and draw bill of exchange on the buyer and submit the documents to a bank with instruction to collect the proceeds through its correspondent bank located in the buyers country. In this case documents delivered against acceptance of Drafts by the buyer.
2. Documentary Credit: Documentary credit is the classic method. This method reduced payment related risks for both exporter and importer substantially. Because documentary credit is conditional payment undertaking of issuing bank to the exporter against compliance of certain terms and conditions and submission of required documents as per credit terms. So under this payment method both exporter and importers feel safe to deal.

Examination and Negotiation of Export Documents:

There are many instances where exporters involve themselves in committing fraud so while exporters tendered export documents for negotiation, special care should be taken in checking the said documents to avoid fraud forgery and protect the interest of the bank. Following are some important checking points:

1. Know your exporter: You should know your customer considering his relationship    with the bank, previous track record and worthiness.

2. Proper checking of Export LC: Export LC is authenticated, irrevocable, valid, Free    Negotiable in Bangladesh, Payment instruction is clear, issued under UCPDC.

3. Proper checking of Export Documents: Bill of Exchange, Commercial invoice, Transport documents and other documents are prepared and presented as   per LC terms.

Processing of FDBP: Enter in FDBP Register and dispatch the documents as per LC terms, Send Duplicate copy of EXP Form to Bangladesh Bank within 14 days.

For FDBP       Dr. FDBP Bill amount X OD Sight Rate [in case of sight bill]

                        Cr. Exporters Account

                        Dr. Exporters Account

                        Cr. Courier Charge

On Realization            Dr. TBL Gen Account [Realized Amount X OD Sight +

Exchange gain.]

                                    Cr. FDBP Account

                                    Cr. Exchange Gain.

Mark FDBP Register and report to Bangladesh Bank and submit Triplicate Copy of Exp Form along with Monthly Foreign Exchange Return.

Processing of FDBC:

Enter in FDBC Register and dispatch the documents as per LC terms, Send Duplicate copy of EXP Form to Bangladesh Bank within 14 days.

For FDBC                   Dr. Customers Liab. on FDBC

                                    Cr. Bankers Liab. on FDBC

On realization  Dr. Bankers Liab. on FDBC

                                    Cr. Customers Liab. on FDBC

                                    Dr. TBL Gen. Account [Realized Amount X OD Sight +

Exchange gain.]

                                    Cr. Exporters Account OD [Sight Rate]

                                    Cr. Exchange gain.

                                    Dr. Exporters Account

                                    Cr. Courier Charge

                                    Cr. Collection Commission

Mark FDBC Register and report to Bangladesh Bank and submit Triplicate Copy of EXP Form along with Monthly Foreign Exchange Return.

Export letter of credit: The export is normally executed against letters of credit opened by overseas buyers. Sometimes shipments are made on CAD, DP, DA or consignment basis without cover of L/C. When export is made against L/C, the exporter should examine the following terms of L/C to avoid any future complicity to execute the order:

1.                     i.            The terms and conditions of L/C are definite, clear and explicit and also are in conformity with those of the contract.
2.                   ii.            The L/C should be an irrevocable one and be confirmed by the advising bank.
3.                 iii.            If the import of the goods is under control in buyer’s country, the buyer holds a valid import license.
4.                 iv.            If the L/C is transferable or otherwise, it should be clearly mentioned in the L/C.
5.                   v.            The L/C should provide sufficient time for shipment and a reasonable time for negotiation. If nothing were mentioned, the shipper would be allowed 21 days to negotiate the documents.

If any of the terms of the L/C appears to be vague, ambiguous or too difficult for the banker to ensure compliance, the banker should immediately refer to the concerned correspondent by letter or cable and get the vagueness removed before advising he L/C to the beneficiary (exporter). On the other hand, if the exporter finds any provisions inconsistent with the underlying contract, he should immediately ask the buyer to carry out necessary amendments though the L/C opening bank.

Shipment:

 After the contract the exporter takes all necessary steps to ship the goods. He may procure or manufacture the goods. Failure to maintain the delivery schedule will expose the exporter to claim from the buyers for damages on account of non-shipment or late shipment, and in addition the exporter may also loose the patronage of the buyer for future export orders. While shipment and after shipment the exporter should obtain or prepare the following documents:

  EXP Form

  Photocopy of registration certificate

  Photocopy of the contract

  Photocopy of the L/C

  Customs copy of ERF Form for shipment of jute goods and EPC Form for raw jute

  Freight certificate from the bank in case of payment of the freight at the port of lading is involved

  Bill of Lading, Railway receipt, Postal receipt, Air way bill or Truck receipt

  Packing list

  Certificate of origin

  Shipping instructions

  Insurance policy.

Issuance of EXP Forms:

All exports must be declared on EXP Form. AD branches supply these forms. The bank certifies EXP form only after confirming the following:

1.                     i.            Arrangements have been made for realization of export proceeds.
2.                   ii.            Bonfires of the importer/consignees abroad
3.                 iii.            Arrangements have been made for receipt by authorized dealer of documents of title to goods,
4.                 iv.            The exporter has signed the EXP.

EXP number should be as under:

 Disposal of EXP form:

a)      The EXP forms are quadruplicate. Exporter will complete and singe the EXP.

b)      After completing the EXP forms, exporter should submit all copies to the AD for certification. After bank’s certification it to be submitted along with the shipping bill to the custom authorities. Custom authorities affixing their seal and signature will return the duplicate, triplicate and quadruplicate copies to the exporter. The original copy to be forwarded to Bangladesh bank by custom authority.

c)      Exporter will submit the remaining copies of EXP forms along with invoice to the AD, through whom payment to be revived.

d)     AD should submit the certified duplicate copy of EXP form to the BB within 14 days from the date of shipment.

e)      Upon receipt of payment, the AD should also submit the triplicate copy of EXP form to BB at the end of the month certifying on the reverse of the form, with monthly summary statement.

Submission of documents:

After the shipment, the exporter submits all these documents to bank for negotiation. The exporter remains in constant touch with the negotiating bank for early negotiation of export bills. If any minor mistake is detected or any document is found missing the same should immediately be corrected or supplied for early settlement of the matter.

Export documents checking:

After submission of exports documents by the exporter, bank must check, whether all the required documents submitted or not. Bank must examine all documents stipulated in the credit with reasonable care to ascertain whether or not they appear, on their face to be in compliance with the terms and conditions of the credit. Documents not stipulated in the credit will not be examined by the bank. The following points of documents should be carefully scrutinized:

Bill of Exchange:

1. Amount of bill differs with invoice
2. Not drawn on L/C issuing branch
3. Not signed
4. Tenor of C/E not identical with L/C
5. Full set not submitted

Invoice:

1. Not issued by the beneficiary
2. Not signed by the beneficiary
3. Not made out in the name of the applicant
4. Description, price, quantity, sales terms of the goods not correspond to the credit
5. Not marked one fold as original
6. Shipping marks differs with B/L and packing list

Packing List:

1. Gross weight, net weight and measurement, number of cartoons/ packages differs with B/L.
2. Not marked one fold as original
3. Not signed by the beneficiary
4. Shipping marks differs with B/L

Bill of Lading/Air Way Bill:

1. Full set of bill not submitted
2. B/L is not drawn or endorsed to the order of IBBL
3. “Shipping on Board”, “Fright Prepaid” or “Freight collect” etc. notations are not marked on the B/L.
4. B/L not indicate the name and capacity of the party i.e. carrier or master, on whose behalf the agent is signing the B/L.
5. Shipped on board notation not showing name of pre-carriage vessel/ intended vessel
6. Shipped on board notation not showing port of loading and vessel name (in case B/L. indicated a place of receipt or taking in charge different from the port of lading)
7. Short form B/L.
8. Charter party B/L.
9. Description of goods in B/L. not agrees with that of invoice, B/E.
10. Alterations in B/L. not authenticated
11. Loaded on deck
12. B/L bearing clauses or notations expressly declaring defective condition of the goods and /or the packages.

Others:

1. Non-negotiable documents not forwarded to buyers or forwarded beyond L/C terms
2. Inadequate number of invoice, packing list and others submitted
3. Short shipment certificate not submitted

Some common discrepancies in export documents:

Ÿ   Late shipment

Ÿ   Late presentation

Ÿ   Part shipment effected

Ÿ   Consignee/ notify party differ

Ÿ   FCR presented instead of B/L.

Ÿ   House air way bill presented instead of AWB

Ÿ   B/L. shows “freight collect” instead of “freight prepaid”.

Ÿ   ‘Shipped on board’ not marked on the B/L.

Ÿ   B/L. is claused

Ÿ   Description of he goods differ

Ÿ   Unit price differ

Ÿ   Amount overdrawn

Ÿ   Pre-shipment inspection certificate absent

Ÿ   Certificate does not cover credit terms

Ÿ   Certificate not signed by authorized person

Ÿ   Not showing inspection of the goofs at named place

Ÿ   Telex acknowledging receipt and giving acceptance on sample, not presented etc.

Export L/C advising:

Advising bank shall take reasonable care to check the apparent authenticity of the credit, which it advises. If the bank elects not to advise or cannot establish apparent authenticity, it must inform to the issuing bank without delay. The bank also may advise unauthenticated credit, informing the beneficiary that it has not been able to establish the authenticity of the credit (UCP Article-7).

Bank will make entry of the L/C in the L/C advising register with its full particulars putting separate serial number under different issuing bank. Subsequent amendment also to be recorded under the correspondent L/C.

Test key arrangement:

Test Key Arrangement is a secret code maintained by the banks for the authentication for their telex messages. It is a systematic procedure by which a test number is given and the person to whom this number is given can easily authenticate the same test number by maintaining that same procedure. TBL, Local Office has test key arrangements with so many banks for the authentication of L/C messages and for the transfer of funds.

Sight or Payment credit: When the credit stipulates that drafts (Bill of Exchange) should be drawn under it on DP terms involving payment to the beneficiary on presentation of documents, it is known as a “Sight or Payment Credit”. In this credit the issuing bank nominates a bank in the exporter’s country as the paying bank. If the paying bank accepts its nomination, its position is that of an agent of the issuing bank. When the documents under the credit are presenter to it, it pays the beneficiary provided all the terms and conditions of credit have been complied with. It gets reimbursement from the issuing bank for the amount paid.  

Deferred Payment Credit: The term “Deferred” means postponed to a future period or date. When a credit does not require the payment to the beneficiary immediately on presentation of the documents but after a specified period has elapsed, it is known as “Deferred Payment Credit”. According to this type of credit, the payment is hot made in full on the tender of documents but by installments at pre-determined future dates. Deferred payment credit may be used where the beneficiary wishes to allow the importer time to pay for the document.

Acceptance Credit: When under the terms of a letter of credit drafts are drawn on DA terms involving payment to the beneficiary on the maturity of the accepted Bill of Exchange drawn under it, the letter or credit is referred to as an “Acceptance Credit” or a “Term Credit”. In this form of credit the beneficiary draws a draft for particular usance (e.g. 30, 60, 90 days sight or even longer), payable upon either the correspondent bank or the issuing bank.

Negotiation Credit: In a negotiation credit the documents are accompanied by a sight draft (bill of exchange). The bill of exchange may be drawn on the issuing bank or the importer or any other bank stipulated in the credit. The bank, which negotiates documents under the credit, purchases the bill of exchange and pays the amount to the beneficiary who tenders the documents. The issuing bank reimburses the negotiating bank.

Settlements of claim:

Exporter very often claims of various natures from the foreign buyers against their exports. It should be ensured that genuine claims of the foreign buyers are settled expeditiously by the exporters concerned so that the reputation of the country is not jeopardized in the international market.

Under the Exchange Control instructions in force, Bangladesh bank’s prior approval in individual case is necessary for making remittances against export claims.

General permission has, however, been accorded to the ADs to make remittances in foreign exchange towards claims against exports of non-traditional items, provided the exporters are willing to make such remittance from the exchange market. Settlement of claims against cash foreign exchange resources of the country will, however, require Bangladesh Bank’s prior approval.

 Foreign Remittance:

1.       Outward remittance:
 On March 24, 1994 Bangladesh Taka was declared convertible for current international transaction. As a result remittances become more liberalized. Outward remittance include sale of Foreign Currency by TT, MT, Draft, TC or in cash for private, official and commercial purpose.
Traveler’s cheque:
Travelers Cheque (TC) is an instrument for a specific amount of widely accepted foreign currencies, issued in favor of Travelers/ Visitors to carry foreign exchange for meeting heir expenses in abroad. Traveler’s cheque may be in different currencies, such as US Dollar, Pound Starling, Japanese Yen, Saudi Riyal, Canadian Dollar, French Frank, German Marks, and Swiss Frank etc. But traveler’s cheque is not issued in this branch.
3.       Issuance of outward DD and TT:
ADs may also issue DD, TT on their foreign correspondent favoring Bangladesh nationals or foreign nationals as per their entitlement. But foreign TT and DD are not issued in this branch.
Inward remittance:
The term inward remittance includes not only purchase of foreign currency by TT, MT, Draft etc. but also purchase of bills, purchase of TC. Utmost care should be taken while purchasing notes, TC, DD and similar instrument for protecting the bank from probable loss as well as safety of the bank officials concerned. But this type of purchase is not done in this branch.

1. Collection of foreign currency instrument:

The Trust Bank Ltd. collects F.C. instruments on behalf of their customer. To collect proceed of Foreign Instrument following procedures to be maintained:

1. Receive instrument with deposit slip
2. Affix crossing stamp of the bank
3. Entry in the register putting OFBC number
4. Affix endorsement “pay to the order of any bank or trust company, prior endorsement guaranteed.”
5. Instrument to be sent to adjacent correspondents.

 FOREIGN CURRENCY ACCOUNTS:

The Trust Bank Ltd opens the following accounts for dealing remittances

NFCD Accounts:

Non-resident Foreign Currency Deposit (NFCD) accounts may now be maintained as long as the account holders desire. Amounts brought in by non-resident Bangladeshis can be deposited in foreign currency account any time after return to Bangladesh.

F.C Accounts of non-resident Bangladeshis:

Foreign currency accounts opened in Bangladesh in the names of Bangladesh nationals or persons of Bangladesh origin working or self employed   abroad can now be maintained as long as the account holders’ desire.

RFCD Accounts:

 Persons ordinarily resident in Bangladesh may maintain foreign currency accounts with foreign exchange brought in at the time of their return to Bangladesh from visits abroad. These accounts are termed as Resident Foreign Currency Deposit (RFCD) accounts. The amount brought in with declaration to customs authorities on form FMJ and up to US $ 5000 brought in without declaration may be credited to this account. However, proceeds of export of goods or services from Bangladesh and commission earnings arising from business deals in Bangladesh cannot be credited to such accounts. Balances of such accounts are freely remittable abroad. Balances of RFCD accounts may also be used by the accounts holders for their travel abroad in the usual manner. RFCD accounts may be opened in US Dollar, Euro, Pound Sterling, Deutsche Mark or Japanese Yen and may be maintained as long as the account holders desire. Interest may be paid on these deposits if these are for a term of not less than one month and the balance is not less than US $ 1000 or Pound Sterling 500 equivalent.

F.C Accounts of other entities:

ADs do not require prior permission of Bangladesh Bank for opening of foreign currency accounts of:

–        Non-resident foreign persons/firms;

–        Diplomatic missions in Bangladesh and their expatriates;

–        Diplomatic bonded warehouses (duty free shops);

–        Local and joint venture contracting firms employed to execute projects financed by foreign donors/international donor agencies;

–                Bangladesh nationals working in the international bodies in Bangladesh and drawing pay and allowances in foreign currency.

Foreign Remittances occurs for the following reasons:

  Investment in shares/securities by non-residents

  Remittance of profits

  Remittance of dividend/capital gain

  Remittance of  salaries and savings by expatriates

  Remittance on account of training and consultancy

 Remittance by shipping lines, airlines, courier service companies

  Booking of Passage

  Private Travel

  Business travel quota for importers and manufacturers producing for domestic markets

  Education

  Medical treatment

  Taking out/bringing in of Bangladesh Taka

  Taking out/bringing in of personal jewelery

MISCELLANEOUS REMITTANCES:

  Remittance of membership fees

  Evaluation and Visa Processing Fee

  Visa fee:

  Family maintenance

COMMERCIAL REMITTANCES

Prior permission of Bangladesh Bank is not required by the ADs for:

–          Opening back-to-back import LCs on account of manufacture-exporters for their input imports as per prescribed input-output coefficients;

–          Issue of bank guarantee/performance bond on account of the merchandise exporters of Bangladesh in favor of foreign buyers;

–          Remittance on account of short weight, quality claim, partial shipment etc. up to 10% of realized export proceeds.

–          payment of discount not exceeding 10% of the invoice value at the request of the exporter where foreign importers refuse to clear goods due to discrepant documents etc.,

–          Remittance of premier on foreign currency policies taken by Bangladesh nationals while residing abroad,

–          Remittance of premier on account of re-insurance,

–          Remittance of “General Average” collected from consignees in Bangladesh,

–          Remittance of pre-shipment inspection fees,

–          Remittance of bonafide expenses incurred by Bangladesh Biman and Bangladesh Shipping Corporation in foreign ports/stations,

–          Remittance on account of charter hire of foreign ships,

–          Remittance of purchase price of ships acquired by private firms/companies,

–          Remittance of royalty/honoraria/fees to non-residents including foreign news agencies for features, articles etc. subscribed by local newspapers/magazines,

–          Advertising of Bangladeshi commodities in mass media abroad.

Findings of the study:

In the middle of twenty first century here we are facing a heavy competition with each other. Here everyone is competing with each and every single point. So today’s business institution are moving forward to remember this concept. If any one has a week point than the rival party will take the opportunity and make a problem for the week intuition.

After complete my internship in The Trust Bank I realized that there are many problems and this may be a cause of huge loss or create a barrier for the future prospect. So the bank should taken care it very seriously.

 Problems:

The Problems for the Trust Bank’s are:

Advertisement Problem: Today’s world is very much depend on the media, so if the intuitions are not think about the advertisement or any kind of activities which is related some kind of advertisement then it will not earn so much popularity. A media can rise or fall an institution within very short time. So if we see to other developed country then we can find that every business intuition has a huge budget for the advertisement purpose. They do not take this expanse as an expanse; they always take it as a huge investment, because if the people do not know about my organization then how they will do business with us (it dose not matter which type of organization is this), it may be big manufacturing company or a bank. Here I realized for The Trust Bank that they do not have any kind of vast advertisement or any kind of social activities, so most of the people do not have any idea about The Trust Bank. In this case when any one asks that “where are you working?” Then if any one says that in The Trust Bank then people reply at first that “is this Mutual Trust”. So for his or her kind information they have to say no there is a bank called The Trust Bank and it is a bank for the army. This bank is also serving the general people but it is not so much popular, because of advertisement. People thought that this bank’s purpose is to serve only army people. That’s why the bank is not go for a vast banking.

Hierarchy Problem: This is another big problem for The Trust Bank, because in the beginning level there are so many ranks to become a principal officer that it may be the cause of brain drain from this bank to other bank.

If any one join as a J.O than it will take 6-8 years to become a P.O, because promotion is after every 2 years or more than 2 years. So for this reason the young employees who are join here as a J.O they will leave this bank after getting an experience. They will take this bank as a tanning center, because after provision period they will look for another bank, which they can get higher position than this bank.

Limited Number Of Branches: The Trust Bank has only 12 branches allover the Bangladesh. So if they want to do a vast business then they have to increase the number of branches.

Limited Power to the Managers: The managers and other high officials have no power for decision-making. The branch managers have no power to sanction loans. In every bank there is a certain amount that a branch manager can sanction, but in this bank if anyone wants to take a single Taka for loan then the manager has to for the head office approval. Some times it may be the cause of losing customer, because it will take time to sanction a loan.

Other Findings:

In a developing country like Bangladesh the need for domestic resource mobilization is of special importance. Deposit held by the financial intermediaries constitutes the major part of domestic financial resources of the country. The other activities of the bank are chiefly dependent upon the deposits. The higher the amount of deposits, the better is the position banks in financing investment projects, especially large-scale projects. The size of deposit shows that TBL’s growth in deposit is notable over the years indicating a growth rate of 67.47%.

(i)     Loan and advance are vital to finance the projects. An appropriate credit distribution system and monitoring will ultimately lead to the profit maximization of banks. It is evident from that the size of TBL’s loans and advances are increasing over the years. It indicates more earning for the bank. It shows a positive growth rate.

(ii)   Profit is the simplest and most convenient measuring rod for appraising the performance of the banks as they deal with finance. The survival and sustained growth are possible when there is a regular flow of profit. Above all, the service value being intangible profit may be the justification of the banks from the financial aspect. Net profit figures show the absolute amount of profits. Trust Bank Ltd. has a positive growth rate in Net Profit. It also indicates a positive trend.

(iii) Return on Asset (ROA) shows that the bank has maintained a positive ROA through 2008 to 2011. The profitability of the bank gradually increased and attained highest ROA of 1.79% in 2008. The ROA of 2011 is lower than 2010, this is because of lower growth in net income compare to asset growth. The trend of ROA is positive and the compound growth rate shows that every 100 taka utilized results a positive growth of ROA of Tk. 0.4612.

(iv) Return on Equity (ROE) measures the efficiency with which common shareholder’s equity is being employed within the firm. The higher the ROE, the better for the company, as they are getting higher amount of net income over the equity. Trust Bank Ltd. has maintained significantly high ROE throughout the years of its operations, which indicates a positive trend. Although it is seen that in 2011 ROE dropped to 14.45% from 24.51% in 2010. This is because of no. of shares increased in 2011.

(v)   Productivity has been measured in terms of the ratio of operating revenue to operating expenditure. If income substantially outweighs expenditure, the productivity of the bank is good. The bank shows a positive trend in terms of productivity. Although the ratio in 2008 is slightly declined because of more operating expenditure compare to operating revenue, it portrays a positive compound growth rate of 23.81%.

(vi) Deposit per employee measures the amount of long-term fund per employee. Deposit per employee consistently increased over the years with a positive trend indicating overall efficiency of the bank.

(vii)           Advance per Branch measures the loans and advances per employee of the bank. Advance per employee consistently increased over the years showing a positive trend. we can see that no. of employees increased over the years as well as volume of advance.

(viii)         Net profit per employee shows that profit per employee is Tk. 485250.74, Tk. 693819.89, Tk. 834809.44 and Tk. 829504.08 for the year 2008, 2009, 2010 and 2011 respectively. It consistently increased over the years. Although a slight decrease in 2008 because of increase in no. of employees at the end of the year. If manpower increases, manpower expenses will also increase and the profitability will decrease by the manpower expenses.

(ix) AD ratio measures the distributive efficiency for the bank. It indicates the liquidity position of the bank. As the bank started its operation in the last quarter of 1999 so the AD ratio in first year and the next two years is very low. During these periods the bank maintained conservative approach in lending. In 2007 the AD ratio moved to more than 80% and maintained an increasing trend up to 2011. The bank is operating efficiently in lending against its deposits, which indicates an increasing trend. The bank is maintaining its AD ratio within a tolerance limit, which indicates an ideal scenario for the bank. It can be inferred that the bank is managing its funds maintaining sound liquidity. It can be said that their funds is used in profitable ends. But the risk will also increase with the increased AD ratio. The trend of AD ratio is positive.

(x)   Bangladesh Bank, the central bank, has instructed all banks to keep 1% as provision against of outstanding of total loans. This provision has been made to meet any kind of future losses. Although Trust Bank Ltd. does not have any classified loans it is maintaining 1% provision for future. The bank is prepared to meet any unwanted situation in future.

(xi) The loan ratio indicates the extent to which assets are devoted to loans. The higher net loan ratio shows the higher earning assets, which is one of the most important policies for the bank. As the net loan ratio increases, the interest earning of the bank increases. Over the last five years the net loan ratio of the bank increased in a significant manner. It shows a positive increase in loan portfolio of the bank.

(xii)           From the analysis the most important factor revealed is that the bank does not have any classified loans. That is all the loans disbursed by the bank are performing well. In a country like Bangladesh, NIL classified loans is a major indicator for the superior performance for a bank and Mutual Trust Bank Ltd. falls into this category.

 RECOMMENDATION:

For improve their performance and remove the problem The Trust Bank has to do some thing and these are:

Vast Advertising: Firstly the bank has to increase their advertisement and also increase their social activities. They have to go with the people’s needs and demands. They have to explore their name to the people that every one can know about The Trust Bank.

Hierarchy Problem: Hierarchy Problem is the second one; it means the bank has to make the duration small from J.O to P.O. Every one has a desire to achieve a good position, so if it takes a long time then the employee may lose their efficiency and they will not provide 100% effort for doing job. So for the bank’s good future they can cut off some level which makes the long hierarchy.

Increase Number of Branches: In this time there is so much competition between each other that a single step can change the all direction. Today’s people are very much willing to do banking, which one is near to them. So if the number of branches will not increases than it can lose the customer.

Give Some Power To the Manager: If the authority gives some power to the managers like: for the purpose of loan sanction then it will be good for the bank. Because when a penitential customer will want to taka a loan in emergency basics then the manger can sanction to a certain limit. It can earn of that customer’s satisfaction and in future he or she may be do vast business with the bank.

Trade disputes and settlements: Export trade as it takes place in between the seller and buyers who live apart in different countries under different situation, Rules, regulations and culture is thus highly technical. The exporters require knowing the global market environment acquainted with regulations and customs.

Dispute in the export trade may arise due to the following reasons:

• Ø  Misunderstanding of the contractual obligation of the either party on the stipulated terms for interpreting differently.
• Ø  Violation of contractual terms by the either party.
• Ø  Buyer’s inability to pay.
• Ø  Sudden change in the government import and tariff policy.
• Ø  Buyer’s refusal for any discrepancy in the export documents.
• Ø  Unwillingness of the buyer to pay the export bill on the flimsy ground.
• Ø  Imposition of quota, tarif etc.

Settlement of Disputes:

In matter of dispute on export trade the exporter may solicit assistance of the following agencies:

• Ø  Commercial Wing of Bangladesh Embassy at that country.
• Ø  Export Promotion Bureau (EPB).
• Ø  Federation of Chambers of Commerce and Industry.
• Ø  International Arbitrary Agency.

Possible way-out where settlement is not at all possible:

• Ø  Sale of goods to new buyer at the port of destination.
• Ø  For finding out a new buyer the exporter may personally visit the port of destination or take help from Bangladesh Embassy.
• Ø  Lodge notice of refusal of payment by the drawee to the Exchange control Department of
• Ø  Bangladesh Bank.
• Ø  Submit copy of new buyer-seller agreement to Bangladesh Bank and obtain permission of sale.

 CONCLUSION:

Banks and financial institutions play an important role in the process of economic growth of a country. Given their considerable economic potential, these institutions have a far – reaching impact on the development and welfare process of the surrounding societies. These financial institutions depend, in accumulating their financial resources, basically

on the inflow of deposits. In order to survive and achieve success, these banks endeavor to attract clients in search of loans to finance their different activities according to the banks established terms and conditions. These banks, which are called commercial banks, depend in their transactions on the interest rate, as the driving factor, which stimulates all their dealings.

In a developing country like Bangladesh, banking business is very much competitive. Almost fifty banks are operating at this moment and competing to hold maximum market share. For a smoothen operation every bank must have the capability of managing asset/liability, liquidity and credit.

Liquidity is one of the essential requirements for the effective functioning of the banking system. Without adequate liquidity, banks are not able to perform some of their core functions, including the settlement of their inter-bank obligations. From the analysis we can also observe that TBL is managing liquidity very well and in a sound liquidity position.

The financial performance evaluation demonstrates that the profitability of the bank has a positive trend. Profitability is an indicator of a bank’s capacity to carry risk and / or to increase its capital. The income statement, a key source of information on a bank’s profitability, as well as the analysis reveals that Trust Bank Ltd. has – attained significant amount of profitability over the years. With a limited number of branch network it has recorded positive growth in net profit because of proper management and right selection of investment criteria.The bank has strong core deposit signifying sound liquidity position and mainataining an ideal scenario in advance-deposit ratio. Overall financial picture of Trust Bank Ltd. for the five-year period shows that it has positively set its root in the financial arena of Bangladesh. The figures do not tell the story of failure. The trend is in favor of Trust Bank Ltd. and the management should take initiative to keep the bank’s way to the success. Globalization of national economies has given a boost to international trade. The seller and the buyer in an international trading transaction must agree for a product or its quality, price etc. enter into a sales contract, spelling out precisely shipping and delivery details, terms of payment, required documentation and other related issues including dispute settlement procedure and legal framework available. The impact on trade transactions currency policies of the importing and exporting countries and risks associated with them, fraud possibilities in the transaction or in documents are also necessary.

A country cannot long continue to have a deficit on foreign current account but a favorable balance of payments on current account may conceal a heavy adverse balance of payments with one individual country or group of countries.

As developing country, Bangladesh is striving to reduce its trade gap. Government is taking necessary steps to enhance its Export sector through the help of market mechanism as well as different financial and institutional incentives to the exporters. At the same time it is taking necessary steps to attract foreign investments and creating efficient human resource to fight the edge of competition. In the line of liberalization of our economic sector, our current account has already been made convertible along with floating exchange rate. With the help of continuous increase in wage earners remittance and inclusion of non-traditional items in export list Bangladesh emerging towards a more stable economy.

REFERENCE

• An Introduction to Research Method by Mr. Md. Kamal Hossain Sarker, First Edition: Fed, 2010
• Articles of Modern Banking System of TBL.
• Annual Report of TBL (2011)
• www. trust bank ltd.com
• www.google.com